Estate planning is a crucial part of your financial plan. Planning ahead can give you greater control and security over your legacy. Learn the basics of the documents and roles generally reviewed in an estate planning conversation, so you can be fully prepared.
What is generally discussed in an estate planning conversation?
Will
A will is a legal document that coordinates the distribution of your assets after death and can appoint guardians for minor children. Without a will, the state in which you reside may decide how to distribute your assets to your beneficiaries according to its laws (known as dying intestate). The resulting settlement process may not produce the results that you would prefer for your survivors. A will can ensure your assets are distributed and guardianship for minor children are aligned with your wishes.
Executor of the will
The executor carries out the terms of the will and sees the estate settlement process through to completion. The executor will be responsible for tasks including collecting the deceased’s assets, paying bills, submitting tax returns, submitting and petitioning for court documents, and distributing the assets to beneficiaries on behalf of the estate. If you don’t know anyone who can and will carry that responsibility, you may appoint a professional, such as a lawyer, accountant, bank, or trust company, as executor or co-executor. If you don’t have an executor at the time of your death, your state probate court will assign someone to determine asset and guardianship distribution.
Trust
A trust is a legal arrangement for the transfer of property by a grantor to a trustee. The type of trust you consider creating—and particularly the language of the trust—will depend on your individual circumstances and goals. There are numerous types and arrangements for trusts; understanding their features is essential.
Power of attorney
A power of attorney document gives another individual the authority to make legal decisions and take action on your behalf. A power of attorney can apply to all your affairs or be limited and apply only to particular assets or accounts you own. A durable power of attorney means this arrangement will generally continue until your death, unless it is formally revoked; it remains in effect when you become incapacitated or are no longer able to make financial decisions on your own behalf. The durable power of attorney can take effect immediately
or at the time of your incapacity but must be established while you still have your mental faculties. You cannot create a durable power of attorney once you become incapacitated.
Health care proxy and living will (advance health care directive):
A health care proxy document allows you to give another individual legal authority to make health care decisions for you in the event that you become incapacitated. In addition, a living will, or advance health care directive can allow you to state your wishes directly to your health care providers.
It’s important to work with an attorney and, potentially, a tax advisor on your estate plan. The attorney’s role will include guiding you through the creation of fundamental estate planning documents (e.g., a will, trust, health care proxy, and durable power of attorney). The tax advisor can help you with any associated tax issues.
You’ll make decisions regarding how each of your assets will pass to your beneficiaries as well as your estate as a whole. Your attorney and tax advisor can help you think through and understand the somewhat complex implications of each option. They will also help you communicate your wishes clearly, consider the treatment of taxes, and adjust your plans as time goes by or your circumstances change.
Your Fidelity Executive Services℠ team can help you better understand estate planning, help connect you with an attorney, and answer questions.
You can also take advantage of Fidelity Estate Planner®*—a free online service that will guide you through the estate planning process.